I don't know your circumstances like how much of each you already own and what your investment time frame is. I own all 3, but if I had to choose only one, I would choose HGMCY because it has the best risk/reward. Kaplan also likes HGMCY best. I also own some GLDFY out of his Model Portfolio, but I am having 2nd thoughts since I really don't understand it very well and it is hard to get good info on it. I trust and respect what Kaplan has to say, but definitely not what Blanchard or his heirs have to say since they have a hidden agenda like most of the newsletter writers out there:
investor1.com
MODEL PORTFOLIO:
The following is a recommended portfolio of worldwide precious metals shares, primarily concentrated in gold mining. The most important factor is that each company's proven long-term profit growth must be a substantial multiple of its corresponding price-earnings ratio. A blend of hedged and unhedged output maximizes the likelihood of a reasonable annual profit combined with the potential for a true windfall whenever gold prices are generally on the rise. Even if the price of gold is unchanged by the year 2010, this portfolio should triple in total dollar value by that date. The initial price is the closing value on Monday, April 26, 1999, when this section was started. The initial starting total portfolio value was $151,875.00.
Harmony Gold Mines (HGMCY, 10,000 shares, initial price 5-1/16, initial market value $50,625.00). This is one of the few companies in the world with a 3:1 ratio between proven profit growth and P/E. Also, Harmony is completely unhedged, so that it is more volatile in both up and down markets. CEO Bernard Swanepoel is extremely aggressive, making acquisitions in and out of South Africa (including Canada) and cutting marginal producers without mercy. The company recently surpassed the one-million ounce per year threshold. As South Africa's largest independent gold mine, it is not subject to the complex cross-ownership web of most of that country's corporations. Harmony's stock price has nearly tripled from its January 1998 bottom although the gold price has of course barely changed during this interval.
Ashanti Goldfields (ASL, 5000 shares, initial price 8-1/16, initial market value $40,312.50). The ratio between proven profit growth and P/E is about 2:1. Ashanti is based in Ghana and operates low-cost gold mines throughout Africa. This management is also alert to market trends; they recently purchased their own shares in Zimbabwe where the price in the local currency was significantly lower than in all other bourses where its shares are traded. Ashanti maintains an active hedging program and will therefore outperform in a flat market, and modestly underperform whenever gold rallies sharply. Its share price is up more than 50% from its lows of September 3, 1998. Listed on the NYSE, it also has options traded on the Amex.
Anglogold (AU, 1000 shares, initial price 21-1/16, initial market value $21,062.50). With a P/E approximately equal to its profit growth, both in low double digits, the world's largest gold miner continues to streamline its operations. Anglogold maintains a hedging program to cushion against gold price flucutations and pays high dividends, providing a good conservative anchor. Options trade in three U.S. markets, giving opportunities for arbitrage.
Newmont Mining (NEM, 1000 shares, initial price 20-3/16, initial market value $20,187.50). Its P/E is variable, as is its profit growth, but this U.S.-based producer is unhedged, providing strong leverage to the gold price. Newmont has had insider buying by nearly all of its top executives during the past calendar year, most notably near the bottom in August 1998. The stock and its options are liquid, offering opportunities for short-term as well as long-term trading.
Durban Roodepoort Deep (DROOY, 5000 shares, initial price 2-1/16, initial market value $10,312.50). A more speculative South African choice, Durban's earnings were higher for the most recently reported quarter, while its P/E is close to its profit growth. Durban has substantial assets which are currently worthless but which will become valuable given a sharp rise in the gold price, making it a high-leverage favorite.
Gold Fields South Africa (GLDFY, 5000 shares, initial price 1-7/8, initial market value $9,375.00). A closed-end mutual fund based in South Africa, it currently trades at a 28% discount to net asset value. Since the fund is likely to unbundle before the end of 1999, this 28% discount will disappear. GLDFY is invested primarily in South African platinum producers and also has a large cash position. |
